Brickworks' unconventional wisdom

Brickworks has been all over the news lately, for all the wrong reasons.

The company is suing major shareholder Perpetual and Mark Carnegie for 'misleading conduct' after their campaign against its cross shareholding with Soul Pattinson (both companies own about 40% of each other).

On Tuesday, Brickworks got a mention at the NSW Independent Commission Against Corruption (ICAC) regarding an alleged $125,000 donation to the Liberal Party via the Free Enterprise Foundation.

Questions are being raised over other donations in the run up to the 2011 Federal election but this one appears above board. Whilst NSW donations to property developers are banned (Brickworks has a property development arm), this one was to a Federal rather than NSW body.

The mystifying aspect, if Climate Spectator is correct, is that it went to a party campaigning against something that was actually in the company's interests.

With the ICAC inquiry revealing a political class that sells itself very cheaply indeed - more Kmart than Dolce & Gabbana – it's a bewildering turn of events.

Using data from the National Greenhouse and Energy Reporting System and other sources including Brickworks' annual report, Climate Spectator's Tristan Edis concludes that the company's direct carbon tax bill was $2,765,221, just 0.5% of revenue.

And yet before its introduction Brickworks managing director Lindsay Partridge claimed that the carbon tax would cut earnings by $9m after tax and that prices would need to rise by at least 6% to recoup this impost.

Lindsay appears to have got that one slightly wrong. Edis cites this commentary from the 2012-13 annual report:

'EBIT was $32.8 million, up 14.9 per cent on the prior year, driven primarily by a strong improvement in the Austral Bricks division. Good pricing outcomes in this division enabled margins to be enhanced despite flat volumes.'

Looks like Brickworks used the carbon tax to push through a juicy price increase.

But that's not all. Edis claims 'Brickworks is listed as the recipient of government grants totalling $17 million [which were] expected to save it $11.7 million per annum on its energy bill.'

Let's get this straight. In the first year of the tax that was expected to cut after tax profit by $9m, earnings rose 15% and Partridge's concern regarding 'reduced house construction' didn't materialise. In addition, grants of $17m, courtesy of the taxpayer, helped Brickworks lower its energy bill by $11.7m a year.

Who would have thought the mining and resources rent tax, which cost almost as much to set up and administer as it raised, could be bettered? Well, folks, we have a winner. That's what I love about our politicians, always up for a challenge.

As for Brickworks, one question remains: Why did it make political donations totalling $384,000 to assist in ditching something so beneficial to its business? Aren't companies meant to donate to political parties to get them to do stuff that, you know, like, helps? One for the annual general meeting on 11 November I'd say. Put it in your diaries.